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What's Hot: eBay Dropoff Franchises

eBay fulfillment franchises are popping up in hopes of becoming the eBay middleman of choice.
July 12, 2004
URL: http://www.entrepreneur.com/article/71754

Ah, the wonders of eBay. Millions of auctions, buyers and sellers attest to its allure. Whether it's a vintage Star Trek lunch pail discovery for one diehard Trekkie or a mother's way to declutter her house, many have found eBay to be the answer for buying or selling something. In fact, eBay addicts search for just about anything and everything their hearts desire, and sellers can turn a little side income into a full-blown business. But for the crop of eBay fulfillment franchises popping up, the real opportunity is found in the untapped numbers of people who wouldn't mind someone else doing the selling for them.

While eBay's Trading Assistants Program, launched in February 2002, enables individuals to assist others in selling items on eBay, franchises such as iSold It, Snappy Auctions and QuikDrop execute that concept on a grander scale. They actually have locations, sometimes called eBay dropoff or consignment stores, where customers can bring in their items for the businesses to sell. Hani Durzy, senior manager of corporate communications at eBay, says these fulfillment franchises hit critical mass around nine to 12 months ago. "We're definitely seeing a trend of these retail storefronts opening up," says Durzy.

Murray Meade and Jack Reynolds' first indication of an opportunity for their QuikDrop International franchise came with the decline of their other business. As co-owners of Quik Internet, which hosts 40,000 e-commerce sites, they grew concerned when business fell 10 percent in 2003 from the previous year. The problem, they discovered, was many of their customers had such phenomenal success selling just a few items on eBay that they decided to just close their e-commerce Web site and move it all over to eBay. The partners knew they had to do something. Rather than trying to beat eBay, they decided to join them, or at least help others join them.

Says Reynolds of their push for QuikDrop, "We realized right away nobody was in the space. A dominant player would have to expand very quickly." Indeed, competition is already at its heels. Another eBay fulfillment business, AuctionDrop, has chosen not to franchise, but instead to partner with The UPS Store, which will act as the dropoff location for AuctionDrop's customers. With 10 stores in six states so far, QuikDrop is already fielding franchising contracts for hundreds more. But for now, the 3,400 locations of The UPS Store in the continental United States is the farthest reaching arm of eBay fulfillment businesses.

Marsha Collier, author of eBay for Dummies, knows what it takes to sell successfully-she's an eBay PowerSeller. She says prospective eBay fulfillment franchisees should consider whether they can generate enough product flow to cover the overhead costs of a storefront. "The key is low overhead, especially with something like this," she explains. "You've got nothing to sell, and you have to wait for people to bring you stuff."

Snappy Auction's founder Debbie Gordon is nonetheless confident. "Getting inventory should not be a problem-it's more about how to be creative and motivate people to bring it to you," she says. Gordon also believes her franchise has the key requirements Collier mentions: low overhead and high demand. "Our model is self-contained, to minimize additional overhead," says Gordon, who adds that Snappy Auction stores holds on to the merchandise rather than sending it to a central location.

While Gordon says ideal franchisee candidates are those with broad business experience, you don't have to be an eBay aficionado to buy this type of franchise. "People can learn the ins and outs of eBay," Gordon. Since starting this year, Snappy Auction has two franchisees and will add 36 more this quarter.

Wave of the Future?

iSold It area developer Rick Morris is familiar with eBay both as a seller and a buyer, and that background has come in handy since he and his two partners bought the rights to the San Antonio, Houston and Dallas/Ft. Worth metro area in February 2004. In fact, Collier highly recommends gaining similar experience before buying an eBay fulfillment franchise, and suggests starting with the eBay Trading Assistants Program, which is free to join. "Why not get on-the-job training before you put out any money?" asks Collier. When customers are unhappy with what their item sold for, you have to be ready to deal with that. Warns Collier, "There's a lot of emotion to dealing with people in customer service, and it's not always easy."

Providing excellent customer service is key for Morris, who hopes his first location in San Antonio is a precursor to future success, as he and his partners have five more in development and a commitment to opening and owning a minimum of 45 locations. "We've received a phenomenal response. I'm the guy in the trenches every day at the store, and our volume is over double what I had projected," says Morris, who posted sales of $50,000 first month, and projects about $900,000 for the first year. He adds that local media coverage has definitely caused a buzz, as has the eBay sign on the storefront, which brings in at least half the traffic.

eBay fulfillment franchisors and franchisees are optimistic about the growth of this service industry. Durzy remarks, "We're excited by the possibility. Anything that extends the eBay marketplace, that promises to bring more people and more items into the eBay marketplace and expose eBay to the larger segment of society is a good thing. We know some people are not listing on eBay and probably never will list on eBay themselves. They have stuff to sell, too-maybe this is an opportunity for them to do so."

In fact, the challenge for these franchises "will to be as excited as the customers," says Collier. "What makes a business succeed more than anything is excitement and understanding of what they're doing."

And since the industry is in its infancy, no one really does know what will happen. "It's way too soon to tell if they will be successful across the board or whether only certain ones will succeed. If so, which business models will perform better than others, and will the eBay community as a whole take to these or not?" says Durzy. Pleasing the community-online and off-will be the ultimate test.